New SEBI proposal for delisting

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Delisting may soon be a whole new game! Market regulator SEBI has proposed guidelines that would alter the pricing mechanism, settlement and a 10 % public shareholding as the trigger for delisting, reports CNBC-TV18.

It's a sign of times to come for companies that want to walk the delisting path. SEBI has found that the book building process for the exit price was not necessarily leading to a genuine price discovery.

The regulator wants to address some of the concerns thrown up in past delisting cases. These are disproportionate powers with the public shareholders holding major chunks, possibility of frivolous bids, freedom to promoters to reject the price and a revision of bids leading to price cartelization. 

The regulator has proposed new pricing rules. The price will be fixed at a 25% premium to the floor price, which is the price when the board informs the exchanges of its decision to delist.

Besides that, the SEBI has also suggested a minimum shareholder subscription level where the public shareholding reduces to 10% to 4 % or the promoter share holding rises to 90 to 96%.

The regulator has proposed that the settlement process of exit offers be handled by merchant bankers and registrars - as they are done in the case of open offers.

These are radical changes but as of now they are merely suggestions. SEBI is still waiting to get a public opinion on the proposal and market watchers  are still studying the concept paper.